Household debt falls to €166bn

Household debt fell by €2.4bn over the final three months of last year to reach €166.2bn, which means every person in the country owes €36,203, according to the Central Bank’s latest quarterly accounts.

Household debt is now in a more sustainable position of 192% of disposable income, down 18.3% since the peak of the boom.

Reflecting improving economic conditions, household net worth rose by 2.9% over the last three months of 2013 to reach €504.2bn, which is the equivalent of €109,771 for every person in the country. Net worth has been on an upward trend since the third quarter in 2012, but it is 29.9% lower than the peak reached in the second quarter of 2007.

“The continuing improvement in the net worth of households largely reflected a further rise in the value of housing assets (+€8.7bn), increases in the value of financial assets (+€3.1bn), and further reductions in liabilities (-€2.4bn).

“Household investment in financial assets remained relatively unchanged during [the fourth quarter of 2013], totalling €0.3bn. New inflows into ‘currency and deposits’ fell to its lowest since [the second quarter of 2012]. There was a marginal increase in investment in ‘insurance technical reserves’. Households continued to reduce investment in ‘shares and other equity’,” the Central Bank said.

Overall, people continue to pay down the massive levels of debt accumulated during the credit-fuelled bubble.

The total level of government debt stood at €202.9bn at the end of December, which was down €1.6bn over the three-month period on bond redemptions. This is the first quarterly drop since 2010.

Private-sector debt increased by 3.4% over the fourth quarter of 2013 to reach 319.1% of GDP. This was the first time there has been an increase in company borrowings since the second quarter of 2012.

“Private sector indebtedness forms part of the EU Commission’s scoreboard of macroeconomic imbalances. The commission sets an indicative threshold of 160% of GDP for private-sector debt sustainability, substantially lower than Ireland’s 319.1%. However, this threshold does not take account of the size of the [multinational corporations] sector in Ireland relative to GDP,” the bank said.